What is shown by the J-curve effect?
- AA successful currency depreciation requires the sum of the import and export elasticities of demand to be greater than 1.
- BAfter a currency devaluation, the current account is likely to get worse before it gets better.
- CIn the short run, the demand for imports and exports tends to be price elastic.
- DThe value of the terms of trade will affect the success of a currency’s devaluation.